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EXHIBIT 10.17
TAX SHARING AGREEMENT
Agreement effective January 1, 1996 by and among ALLIED Group, Inc.
("Parent") and each of its undersigned subsidiaries.
WHEREAS, the parties hereto are members of an affiliated group ("Affiliated
Group") as defined in Section 1504(a) of the Internal Revenue Code of 1986
as amended; and
WHEREAS, some of the parties hereto may be members of a unitary group
("Unitary Group") as defined by various state laws; and
WHEREAS, the parties hereto may elect or be required to file their federal
income tax returns on a consolidated basis and file their various state
income tax returns on a consolidated, unitary or separate basis and desire
to properly account for the economic consequences of this arrangement,
WHEREAS, it is the intent and desire of the parties hereto that a method be
established for reimbursing the Parent for payment of tax liability, for
compensating any party for use of its losses or tax credits, and to provide
for the allocation and payment of any refund arising from a carryback of
losses or tax credits from subsequent taxable years,
NOW THEREFORE, in consideration of the mutual covenants and promises
contained herein, the parties hereto agree as follows:
1. Parent to Prepare and File Returns. A consolidated federal income tax
return and consolidated, unitary, or separate state tax income tax returns
shall be prepared and filed by the Parent for the taxable year ended
December 31, 1996 and for each subsequent taxable period in respect of
which this agreement is in effect. Each subsidiary shall execute and file
such consent, elections, and other documents that may be required or
appropriate for the proper filing of such returns.
2. Federal Tax Allocation. For each taxable period, each member of the
Affiliated Group shall compute its separate tax liability as if it had
filed a separate tax return and shall pay such amount to the Parent. The
separate return tax liability of each member shall be computed pursuant to
the provision of Regulations Section 1.1502-33(d)(3) in a manner provided
by Regulations Section 1.1502-33(d)(2)(ii) in conjunction with the method
described in Regulations Section 1.1552-1(a)(2).
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3. State Tax Allocation.
(a) Separate Returns.
The Parent and each subsidiary shall be allocated its own
separately computed state income tax liability from those states
requiring tax to be computed on a separate return basis.
(b) Unitary Group and Affiliated Group Returns.
The Unitary or Affiliated Group shall allocate to each member the
total state income tax liability from those states requiring a
consolidated or unitary return filing based on the following formula:
[each members separate company state taxable income or loss
before apportionment and net operating loss deduction] divided by
[total sum of all members separate state taxable income or loss
before apportionment and net operating loss deduction] multiplyed
by [total affiliated or unitary state income tax on taxable
income before net operating deduction and tax credits]
All prior tax year carryover tax credits and tax benefits of net
operating loss deductions shall be specifically allocated to
those members based on the allocation used in the tax year in
which the net operating loss or tax credit was originally
created.
All tax credits except prior tax year carryover credits shall be
specifically allocated to the unitary members computed on a
separate return basis.
All tax credits and net operating losses carried forward from
years prior to a member joining the Affiliated or Unitary Group
shall be specially allocated to that member.
4. Payments. Each subsidiary shall pay to the Parent its allocation of
quarterly estimated, final or amended return taxes payable to the Internal
Revenue Service and any other state taxing authority within five days of
receiving notice of such payment from the Parent.
5. Refund of Overpayment. If for any taxable period the separate return
liability of each member of the Affiliated Group, including the Parent or
Unitary Group, exceeds the consolidated or unitary tax liability for such
period as a result of any excess losses or tax credits of one or more
members, then the Parent shall pay to each such member its allocable
portion of such excess amount within sixty days after the date of filing of
the consolidated or unitary return for such period. The excess federal tax
amount to be reimbursed to such member shall be computed in a manner
consistent with the provisions of Regulation Section 1.1502-33(d)(2)(ii).
In utilization of this Regulation Section, the percentage referred to in
Regulation Section 1.1502-33(d)(2)(ii)(b) shall be 100 percent.
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6. Carryback or Forward of Unused Federal Loss or Tax Credit. If part of
all of an unused loss or tax credit is allocated to a member of the
Affiliated Group pursuant to Regulation Section 1.1502-79, and it is
carried back or forward to a year in which such member filed a separate
return or a consolidated return with another affiliated group, any refund
or reduction in tax liability arising from the carryback or carryover shall
be retained by such member. Notwithstanding the above, the Parent shall
determine whether an election shall be made not to carryback part or all of
the consolidated net operating loss for any taxable year in accordance with
Section 172(b)(3)(c) of the Internal Revenue Code of 1986 as amended.
7. Adjustment of Taxable Period. If the consolidated or unitary tax
liability is adjusted for any taxable period, whether by means of an
amended return, claim for refund or after a tax audit by the Internal
Revenue Service or respective states, the liability of each member shall be
recomputed to give effect to such adjustments, and in the case of a refund,
the Parent shall make payment to each member for its share of the refund,
determined in the same manner as in paragraph (5) above, within thirty days
after the refund is received by the Parent, and in the case of an increase
in tax liability, each member shall pay to the parent its allocable share
of such increased tax liability within five days after receiving notice of
such liability from the Parent. In the event that the taxing authority
levies upon a member's assets in excess of its adjusted portion of the
consolidated tax liability, the member will be adequately indemnified by
the other members.
8. Acquisition through Organization or Additional Corporation. If during a
consolidated return period the Parent or any subsidiary acquires or
organizes another corporation that is required to be included in the
consolidated return, then such corporation shall join in and be bound by
this agreement.
9. Term. This agreement shall apply to the taxable year ending December 31,
1996 and all subsequent taxable periods unless the Parent and the
subsidiaries agree to terminate the agreement. Notwithstanding such
termination, this agreement shall continue in effect with respect to any
payment or refund for all taxable periods prior to termination.
10. Application to Successors in Interest. This agreement shall be binding
upon and inure to the benefit of any successor, whether by statutory
merger, acquisition of assets or otherwise, to any parties hereto, to the
same extent as if the successor had been an original party to the
agreement.
11. Arbitration. Any dispute arising out of or relating to this Tax Sharing
Agreement("Agreement") or the breach thereof between Parent and any of the
subsidiaries signatory hereto shall be settled by arbitration in accordance
with the Commercial Arbitration Rules of the American Arbitration
Association. Arbitration may be initiated by any party to a dispute, giving
notice to each other party two copies of such notice with the American
Arbitration Association and by complying with other applicable provisions
of the Association's Rules.
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12. Modification of Agreement. No party has the authority to change
any provisions of this Agreement or waive any of its provisions. No
change in this Agreement shall be binding, unless first expressed in
writing and signed by each party hereto.
13. Superseding Agreement. The parties hereto acknowledge that this
agreement shall supersede all other agreements, oral or written,
between the parties.
14. Exchange of Information. The parties hereto acknowledge that the
exchange and flow of information is critical to the operation of this
agreement. Having acknowledged this fact, the parties hereby agree to grant
free and unrestricted access, at reasonable times, to those books and
records necessary for the operation of this agreement.
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IN WITNESS WHEREOF, the parties hereto have caused this agreement to be
executed by their duly authorized representatives.
ALLIED Group, Inc.
By _________________________ Date __________________________
Xxxxx X. Xxxxxxx
President (Financial)/Treasurer
AMCO Insurance Company
By _________________________ Date __________________________
Xxxxxxx X. Xxxxx
Assistant Vice President
ALLIED Property and Casualty
Insurance Company
By _________________________ Date __________________________
Xxxxxxx X. Xxxxx
Assistant Vice President
Depositors Insurance Company
By _________________________ Date __________________________
Xxxxxxx X. Xxxxx
Assistant Vice President
Western Heritage Insurance Company
By _________________________ Date __________________________
Xxxxx X. Xxxxxx
Treasurer/Assistant Secretary
ALLIED Group Mortgage Company
By _________________________ Date __________________________
Xxxxxxx X. Xxxxx
Assistant Vice President
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ALLIED General Agency Company
By _________________________ Date __________________________
Xxxxxxx X. Xxxxx
Assistant Vice President
ALLIED Group Information Systems, Inc.
By _________________________ Date __________________________
Xxxxxxx X. Xxxxx
Assistant Vice President
The Freedom Group, Inc.
By _________________________ Date __________________________
Xxxxxxx X. Xxxxx
Assistant Vice President
Midwest Printing Services, Ltd.
By _________________________ Date __________________________
Xxxxxxx X. Xxxxx
Assistant Vice President
ALLIED Group Leasing Corporation
By _________________________ Date __________________________
Xxxxx X. Xxxxxxx
Treasurer
